Mumbai, Feb 07: The National Company Law Tribunal (NCLT) has directed Oil and Natural Gas Corporation Limited (ONGC) to release long-pending contractual dues to Dolphin Offshore Enterprises (India) Ltd, holding that the pre-CIRP tax claims of the GST Department stood fully extinguished upon approval of the company’s resolution plan.
“We hold that the dues of the Office of the Assistant Commissioner of Central GST & Central Excise from the Corporate Debtor stand extinguished and the notice dated January 30, 2020 is no more applicable. Accordingly, prayers including the immediate clearance of the outstanding dues of the Corporate Debtor—amounting to Rs 1,75,02,553.57 plus USD 1,07,678.15 in relation to one contract and Rs 22.14 crore in relation to another, along with interest for the delayed period—are allowed,” the tribunal observed.
Bench allows Dolphin Offshore’s application
The order was passed by a bench comprising Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer while allowing an interlocutory application filed by Dolphin Offshore under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), 2016.
Dues withheld due to GST recovery notice
Dolphin Offshore, now under new management following its acquisition by Deep Industries Limited through the insolvency resolution process, had approached the tribunal seeking directions to ONGC to release outstanding payments that were withheld due to a garnishee notice issued by the Central GST Department in January 2020.
The tribunal noted that Dolphin Offshore had been awarded two offshore contracts by ONGC. While ONGC admitted that Rs 1.75 crore along with USD 1,07,678 was payable under one contract, payments were withheld after the GST department initiated recovery proceedings against the company for alleged service tax and GST dues exceeding Rs 66 crore.
Resolution plan settled government dues
During the Corporate Insolvency Resolution Process (CIRP), the resolution plan approved by the NCLT on September 29, 2022 provided for payment of only Rs 7.65 lakh towards full and final settlement of government dues. The Assistant Commissioner of Central GST & Central Excise department accepted this amount and subsequently confirmed in writing in March 2024 that its earlier recovery notice “did not hold ground”.
“The GST department, vide reply dated March 28, 2024, confirmed that the service tax and GST dues of the Corporate Debtor had been paid as per the approved resolution plan and that the notice dated January 30, 2020 did not hold ground. Accordingly, ONGC was informed of the removal of all impediments in releasing the outstanding dues,” the petition stated.
Department’s ‘U’ turn draws tribunal’s ire
Despite this, the department later informed ONGC that it was seeking legal opinion and that the earlier garnishee notice would continue, prompting ONGC to seek clarity from the tribunal before releasing the payments.
Strongly criticising the conduct of the tax department, the NCLT observed that once a resolution plan is approved under Section 31 of the IBC, all claims not provided for in the plan stand extinguished and are binding on all stakeholders, including government authorities.
Relying on the Supreme Court’s ruling in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., the tribunal held that the Assistant Commissioner of Central GST & Central Excise department could not revive or continue recovery proceedings after having accepted the resolution plan.
“The stand of Respondent No. 2 (Assistant Commissioner of Central GST & Central Excise) is unstable and changing. Such conduct goes against the core objectives of the IBC, particularly certainty and timelines,” the tribunal remarked.
In strong words, the bench further observed, “We note that the Assistant Commissioner of Central GST & Central Excise office has already taken a position that once the resolution plan is approved and payment has been received as per the plan, its pre-CIRP dues stand extinguished. We are surprised to observe that even after taking such a position, a government department could take a ‘U’ turn and communicate to ONGC, vide letter dated July 31, 2024, that the earlier notice dated January 30, 2020 would remain in force until further communication.”
ONGC told to release payments
Allowing the application, the NCLT declared that the GST department’s pre-CIRP dues stood extinguished and that the garnishee notice dated January 30, 2020 was no longer applicable. It consequently directed ONGC to release the admitted dues payable to Dolphin Offshore.
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Order to be shared with IBBI
The tribunal also directed that a copy of the order be forwarded to the Insolvency and Bankruptcy Board of India (IBBI) to examine whether the resolution professional had taken adequate steps during the CIRP to recover receivables from ONGC and whether such amounts were properly reflected in the information memorandum.
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